US Stocks continue their recovery from a post-DeepSeek and post-tariffs period as nerves surrounding Donald Trump’s unpredictable policies calm down. The Nasdaq is surging 1.19% followed by the S&P 500 at 0.64%. The bullishness is expected to continue for the remainder of the day.
To determine which stocks could outperform the market in the coming months, it is essential to look at sectors that are benefitting from ongoing trends. IT stocks are unique in a way that with time, all companies have to spend more to keep their systems updated. Analysts expect companies to add 5% to their IT budgets in 2025. This, together with the increasing demand for AI products, will propel the sector’s returns in 2025.
Some companies have already started the year on a positive note. There are companies that are seeing increasing demand for their innovative products while others continue to serve the infrastructure involved in deploying these innovative solutions. Either way, it is important to look at what’s driving these stocks.
We decided to take a look at the top 10 mid-cap IT stocks that are outperforming the market in 2025. To come up with our list, we only considered stocks with a market cap of at least $10 billion with the highest return since the start of the year.
10. EPAM Systems Inc. (NYSE:EPAM)
EPAM Systems Inc. is a global software development and digital platform engineering services provider. It offers infrastructure management services, engineering services, smart automation services, technical advisory consulting services, and other services. The stock is up 11% this year on the back of strong earnings, improving financial strength, and collaborations.
The company comfortably beat analyst estimates by reporting an EPS of $3.12 against estimates of $2.7. Revenues also came in stronger than expected. Investors will be pleased to see the company register topline growth as the recent downturn in revenue was starting to worry them.
As a result of the impressive earnings, the company continues to see improving cash flows. During the first three quarters, the company already generated $429 in cash, significantly boosting its cash pile which stood at $2.04 billion. The improving cash flows set the company up for share buybacks as well as any acquisitions that it may deem fit for business growth.
Just last month, the company announced an expansion of its existing collaboration with Google Cloud. While this enhancement won’t impact the upcoming Q4 results on the 20th of February, it should help the company continue on its growth trajectory.
9. Cognizant Technology Solutions Corporation (NASDAQ:CTSH)
Cognizant Technology Solutions Corporation is an outsourcing and technology & consulting services provider firm. The company operates through products & resources; financial services; communications, media & technology; and health sciences segments. The stock is up 12% this year supported by the strong financial results of Q4.
The company managed to beat analyst estimates by surpassing the expected EPS by $0.08. The revenue generated also exceeded estimates by $10 million with a 6.7% growth YoY. The revenue surge came as a result of an 11% YoY increase in bookings in Q4. Moreover, the company entered into 10 large deals (worth more than $100 million or more) during the quarter.
Based on Q4 results, guidance for the full year 2025 indicates a growth rate of 2.6 – 5.1%, while operating margins are predicted to improve from 15.5% to 15.7%. On another positive note, the company extended its strategic partnership with McDonald’s (MCD) recently. As per the agreement, the primary focus is to utilize technology to enhance MCD’s operational efficiency and customer satisfaction. CTSH also declared a strategic partnership with CrowdStrike (CRWD) last month to enhance the safety and security of corporate giants across industries.
8. CDW Corporation (NASDAQ:CDW)
CDW Corporation is a leading information technology solutions provider company. It operates in public, corporate, and small business segments. The company provides integrated IT solutions, hardware & software products and services, advisory and design services, and other services. The stock has rewarded investors with a 10% gain this year.
Following a two-year slump, the company finally regained momentum on the back of recent Q4 results. The revenue growth is fueled by increasing hardware sales year-over-year making it a great milestone for the company. As hardware accounts for the major proportion of CDW’s business, an increase in its sales could result in stronger revenue growth in FY2025 as well.
Analysts forecast a low single-digit growth in the U.S. IT market whereas CDW targets to outgrow 2-3% of the overall market. Though there are uncertainties regarding inflation and interest rates, the management is confident it can handle any scenario arising from these factors:
While our market view recognizes the potential for meaningful exogenous factors to impact demand, including policy uncertainty and inflation, we are comfortable with our prudent outlook.
7. Genpact Limited (NYSE:G)
Genpact Limited is an IT and business process outsourcing services provider that operates in high-tech & manufacturing, financial services, and consumer & healthcare segments. The company offers a wide range of services including financial crime & risk management services, customer service, compliance services, and other services. The stock is up 27% this year driven by strong earnings of Q4.
While the company was pleased with its fourth-quarter results, the interesting part was the company’s products, not the revenue. G started using the Genpact Gigafactory and AI Value Studio, which have helped the company scale its solutions effectively. The company has also just announced its agentic AI solutions which will help it cash in on the Agentic AI wave that is currently sweeping the AI world.
Genpact’s consistent innovation is likely to drive its future growth, primarily by increasing its TAM which the market should take as a huge positive. Here’s what CEO Balkrishan Kalra had to say about this:
Genpact’s Data-Tech-AI revenue was up 9% year-over-year, more than double the growth in the previous quarter. This was driven by both innovation and execution, with generative AI (GenAI) significantly expanding Genpact’s total addressable market.
6. International Business Machines Corporation (NYSE:IBM)
International Business Machines Corporation is an integrated services and solutions provider. It operates through four segments; infrastructure, software, financing, and consulting. The company has established strategic partnerships with various organizations including Microsoft, Samsung Electronics & SAP, Amazon Web Series, and others. The stock is experiencing an upward momentum with a 14% gain this year due to the strong growth reported in Q4 earnings.
The tech giant reported total AI products and services bookings exceeding $5 billion which grew substantially from the $3 billion reported in the last quarter. According to the management, 20% of the total AI bookings were from the company’s software business. Another key point is a 13.7% increase in cash flows that can be utilized for share buybacks and marketing to stay ahead of the competition.
Based on the last quarter’s performance, management is optimistic about the future outlook of the company. It raised its growth targets for 2025 and now expects revenue growth of about 5% while cashflows are predicted to be $13.5 billion. This growth is further supported by analysts’ optimism as most of them maintained their rating and raised the target price assigned to the stock. Stifel raised the target price from $271 to $290. RBC Capital Markets also raised its price target from $250 to $276 while Morgan Stanley kept its Equal Weight rating but increased the price target of the share from $217 to $228. Moreover, Evercore also maintained its Outperform rating but raised the target price from $240 to $275.
The CEO of the company, James Kavanaugh had this to say about future guidance:
Our 2025 guidance reflects the next evolution of our model, There is $13.5B in free cash flow and 5% revenue growth. 2025 is just the beginning of our model.
5. ExlService Holdings Inc. (NASDAQ:EXLS)
ExlService Holdings Inc. provides data analysis and digital operations & solutions services. It operates through four segments; analytics, insurance, emerging business, and healthcare. The stock is up 15% so far this year.
EXLS doesn’t announce its Q4 earnings till the end of February so there is probably still a bit more juice in its ongoing rally. The last time the management did an earnings call, the company reported a decent earnings beat. The revenue of $472.07 million came in better than the estimates by $11.27 million. The EPS of $0.44 also beat estimates by $0.03. A 15% revenue growth and a 16% earnings growth was a satisfactory performance for the management.
The CEO of the company, Rohit Kapoor, is also quite optimistic about the company’s future prospects:
As we continue to expand our data modernization and AI solution set with innovations such as industry-specific large language models (LLMs), we are well positioned to continue our momentum into the fourth quarter and beyond
As a rather small player in AI, EXLS does stand the risk of government regulation or outright changes in the way AI develops in the coming months. Despite the company’s strengths, there are competitors out there that are doing the same thing and EXLS will have to differentiate itself to keep its moat. Investors will need to keep a close eye on how the technology and the company develop.
4. Kyndryl Holdings Inc. (NYSE:KD)
Kyndryl Holdings Inc. is an IT infrastructure services provider that offers core enterprise & zCloud services, digital workplace services, network & edge services, cloud services, and other services. It provides its services to technology, retail & travel, financial, automotive, and media & telecom industries. The stock is up 20% this year but has already doubled in the last year.
Kyndryl has signed several important deals in 2024, essentially driving the optimism behind the stock. While a $2 billion agreement was the highlight of the year, nearly a dozen other deals amounting to over $100 million each have made investors realize the company can make consistent and stable income. The CEO believes this response from the company is proof that the company’s investments and vision are bearing fruit. As IT systems grow more and more complex by the day, Kyndryl’s ability to manage these systems will become increasingly relevant.
Despite shrinking revenues, the company was able to increase its gross profit, which suggests active efforts to run the business more efficiently. A healthy and growing cash flow, together with short-term liquidity of $4.5 billion, position the company strongly for a good year ahead.
3. Ingram Micro Holdings Corporation (NYSE:INGM)
Ingram Micro Holdings Corporation provides technology solutions and services to resellers, retailers, and vendors. It offers third-party cloud-based services, client and endpoint solutions, and other products and services. The stock is up 22% this year and has a lot going its way.
INGM stock is doing well because of a number of reasons. For starters, the company announces its earnings report this week and analysts believe the Wall Street estimates are conservative and will be easily crushed. Morgan Stanley recently echoed this sentiment and moved the stock’s price target from $25 to $27.
Another tailwind for the stock is the improving business outlook for small and medium enterprises. INGM’s business is skewed towards businesses that require its hardware and OC, servers, and storage requirements aren’t going down anytime soon. Companies across the country are expected to up their IT budgets by 5% in 2025 and firms like Ingram are expected to reap the benefits.
The company should continue to roll out its digital offerings as the year progresses but some catalysts that could really improve investor returns include the possibility of dividend payouts and improving PC demand. Investors just need to be careful with the volatility though as INGM is a relatively new company on the stock market and with each passing quarter, investor sentiment is likely to fluctuate big time.
2. WNS (Holdings) Limited (NYSE:WNS)
WNS (Holdings) Limited operates as a business process management company that provides analytical, data, business transformation, and voice services. It operates through four segments; BFSI, TSLU, MRHP, and HCLS. Despite high risks, the company is up 27% for the year. Let’s take a look at whether this surge in price is justified, or makes the stock too risky to get involved in.
WNS announced its Q3 result on 23rd January, reporting modest growth in revenue. While the EPS declined YoY, it is more in line with the company’s recent performance and expectations. If anything, it shows that the company is stabilizing. The company’s digital transformation products and solutions continue to be in demand, as shown by the addition of 7 new clients during the quarter. The company also expanded 52 of its existing partnerships.
The management is anticipating a low double-digit growth in fiscal 2026 and that is where the recent price surge comes from. The deals that the company has in the pipeline can easily account for 25% of the revenue guidance for 2025. Good execution could mean beating estimates is a given as the company’s own guidance is quite conservative. A few large deals, which can’t be ruled out given the quality of the company’s GenAI solutions, could make the stock skyrocket.
Another way to look at the stock, and to evaluate the risk, is to ask why the company hasn’t been able to close any of the 20 deals it has in the pipeline. This is a valid question to ask and raises doubts over the management’s business execution. However, if the investor is willing to bet on the management, the rewards could be massive.
1. VNET Group Inc. (NASDAQ:VNET)
VNET Group Inc. is an investment holding company that provides hosting and related services in China. The company offers interconnectivity services, managed hosting services, and value-added services. It provides its services to individuals, government agencies, gaming & entertainment, e-commerce, financial services and other industries.
VNET stock has nearly doubled since the 1st of January 2025. However, even this performance pales in comparison to the 466% one-year returns. This is a $2.4 billion market cap company that may well be experiencing a re-rating right now. Getting in while it’s hot may not be everyone’s cup of tea. But let’s try to dig more and see if the rally is justified and if there’s still enough juice left in it.
One of the reasons for the company’s outperformance is that the barriers to entry for AI-driven data centers are very high. When companies need to deploy any significant IR capacity in a short period of time, there’s only a handful of companies that can do that, VNET being one of them. The company also benefits from its main competitors, ZDATA and Centrin Data, shifting their focus to other parts of their business.
As long as AI training and inference demand keeps up, VNET’s business looks pretty solid. A solid pipeline of orders coupled with this demand can continue the stock’s revival, which had seen a lot of shareholder wealth destruction in the last 4 years.
VNET Group Inc. is not on our latest list of the 30 Most Popular Stocks Among Hedge Funds. As per our database, 26 hedge fund portfolios held VNET at the end of the third quarter which was 27 in the previous quarter. While we acknowledge the potential of VNET as a leading AI investment, our conviction lies in the belief that some AI stocks hold greater promise for delivering higher returns, and doing so within a shorter timeframe. If you are looking for an AI stock that is as promising as VNET but that trades at less than 5 times its earnings, check out our report about the cheapest AI stock.
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Disclosure: None. This article was originally published at Insider Monkey.
